Why you should opt for a ready to move in house
If you
buy a ready-for-possession property, you won't have to pay both home loan EMIs
and rent, as in the case of an under-construction home
The
resale housing market, particularly the brand new, ready for-possession
segment, offers home buyers a chance to side step the risks of buying under
construction properties that are prone to delays. The usual 10-15% cost premium
of ready-to-move in properties, however, has dissuaded buyers from investing in
them. With this premium coming down, should home-buyers tap into the
quick-possession resale market, or does it make sense to wait for 2-3 years and
invest in an under-construction home?
Erosion
in premium
Recently,
there has been a substantial jump in inventory in the resale market. This
pile-up has made purchasing a possession-ready property a more viable option.
Experts reckon home-buyers will find good deals in the resale market rather
than from developers. Kishor Pate, CMD, Amit Enterprises Housing, says, “Never
in the history of the Indian real estate market have properties ready for
possession been so cost-effective. “
Quality
properties from reputed developers, in good locations, are now available for
possession at prices previously available to buyers willing to wait for two
years or more, Pate adds. Excess inventory has helped check prices. Shveta
Jain, MD, Residential Services, Cushman & Wakefield, says, “Jump in cost
for properties after completion of construction is no longer visible owing to
the excess inventory. “ The provisions of the new real estate Bill have also
pushed developers to complete projects faster, adding to the inventory pile.
“Projects that were held up are now coming through thick and fast as developers
rush to ensure that they don't fall foul of the Real Estate Regulatory Act. A
muted demand has prevented the prices of these homes from rising as before,“
says Jayashree Kurup, Head of Content and Research, Magicbricks.
The primary
benefit of buying a possession-ready house is that you save on rent. And, if
you do not plan on using it as your residence, you can let it out on rent and
start earning an income. With an under-construction property, there is always
the chance of delay. The financial implications of that are too many. There’s
the double whammy of having to shell out EMIs on the home loan as well as
paying rent. Buyers also stand to lose out on a chunk of tax benefits on
interest payment towards the housing loan, if they do not get get possession
within five years of having availed of the loan. For someone in the top income
tax bracket of 30%, such a delay can lead to a sharp drop in tax benefit: from
`60,000 to just `9,000 a year. A staggering 59% of respondents to our survey
were interested in buying a new ready-to move in home, while 16% said they
preferred an under-construction house.
The
choice also depends on the affordability of a property , availability of funds
and possession timeline. If you do not have the funds and can wait for some
time, an under-construction property is the better option. But if you have the
money and want to see the back of your landlord, go ahead and buy a ready-to
move in property. “If the buyer needs the property for immediate use, and has the
finances, it makes sense to invest in a possession-ready home, “says A.S.
Sivaramakrishnan, Head, Residential Services, India, CBRE South Asia.
Things to
bear in mind
Apart
from higher cost, a possession ready, resale property has a few more
disadvantages. The choice of properties in the resale market is limited
compared to projects under construction. The latter allows you a wider choice
with regards to floor preference, view, etc. You also have to do more legwork
to arrange for documentation in the case of resale properties. “The key factor
to be considered when opting for an unused resale property is the title
clearance--the passing of ownership of the house from the seller to the buyer, “says
Sivaramakrishnan. A lot of legal work is re quired to ensure everything is in order.
Unlike in an under-construction property, buyers of possession-ready property
have to start paying EMIs on their home loan immediately, besides shelling out
the down payment, registration and stamp duty.
While
developers these days offer attractive payment schemes and freebies, you would
be foregoing these luxuries in a possession-ready property. Also, the scope for
capital appreciation is muted.
Where the
property is more than a few years old, a lot of the development around it has
already taken place and it is likely priced-in.
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